What do the scholars and experts of Islam say about this case: ‘Z’ wanted to dig a well to supply the mosque with clean water. However, he run out of money and eventually borrowed money to complete the project and became in debt. In this situation, is it allowed to give him Zakat? Please explain.
It is permissible to give Zakat to anyone who is in debt, such that after paying the debt, excluding his real needs, he would not have the amount of Nisab left. In fact it is better to give to such a person than to anyone else who is in need. If the indebted have thousands of pounds of debt he can receive thousands of pounds. (Radd ul Mukhtar).
And Allah ﷻ knows best
Imam Ahmad Rida Khan رحمة الله تعالى عليه
Translation by Dr Musharraf Hussain Al-Azhari Translator of Majestic Quran, www.majesticquran.co.uk